On 29 April, Facebook [FB] is expected to report its first-quarter earnings for the fiscal quarter ending March 2020. According to Zacks Investment Research, earnings per share (EPS) are forecast at $1.78. Considering recent volatility across all markets, that is reassuring for Facebook’s share price investors.

With mounting competition from up-and-coming social media apps like TikTok, Facebook’s monopoly of the market is likely to be a thing of the past. For example, in 2017 the social media giant’s fiscal 2017 sales increased by 47%. The following year however this dropped by 10% and in 2019 sales growth fell 10% further to 27%. Facebook’s revenue growth for 2020 looks likely to fall further still; a continuation of a worrying trend for traders and investors in Facebook’s share price.

However, with a revenue (TTM) of $70.7bn, revenue per share (TTM) of $24.77 and 24.60% quarterly revenue growth (year-over-year), Facebook is consistently logging strong capital growth.

Zacks’ EPS prediction for Facebook would mark a year-over-year growth of 110.59%. For the full-year outlook, analysts are calling for EPS of $7.62 per share with a $78.43bn revenue. Despite the overall slowdown in growth, this still totals +18.51% and +10.93% respectively; a boon for those invested in Facebook’s share price amid unprecedented market volatility.

According to the analysts’ ranking system and assessment of Facebook’s share price performance over the past 30 days, the company has a number-three ranking (hold). With the industry average forward P/E sitting at 26.42, it is currently trading at a discounted 22.94, with a PEG ratio of 1.15 (compared to the 2.44 of the internet services industry).

As of Facebook’s 2019 fiscal year-end to December, the company boasted a 26.10% profit margin, 33.93% operating margin (TTM) and a 13.00% return on assets (TTM).

110.59%

Zack's EPS growth prediction for Facebook

Big fish in a shrinking pond

Facebook has shown some resilience in a tough market despite its slowing rate of growth. Shares outperformed the S&P 500 in the first quarter, albeit only just dropping around 18% compared to the S&P 500’s 20% drop. Analysts have cited the growth in popularity of Instagram Stories (Facebook owns Instagram) due to self-isolation as a result of the coronavirus pandemic across the world, as well as an expanding userbase in the Asia Pacific.

Despite the silver lining, Facebook has benefitted from as the coronavirus continues to affect the macroeconomy, experts predict advertising sales to be hurt by ongoing global lockdowns. Advertising revenue is one of the biggest contributors to the company’s cash generation. In fact, nearly 99% of Facebook’s revenue last year came from advertising across WhatsApp, Messenger and Facebook itself. With companies cutting back on advertising spending, it remains to be seen what knock-on effect this will have.

99%

of Facebook's revenue last year came from advertising

Even as the market becomes more crowded Facebook consistently dominates, including when it comes to different social platforms. Last year experts at eMarketer predicted that digital advertising is expected to increase from 46% of the total global advertising market in 2018 to 60.5% by 2023, proving that Facebook is capitalising on an increasingly lucrative sector.

However, with governing bodies following strict GDPR guidelines, Facebook could struggle to keep out of trouble while leading the way in social media.

Future challenges

Levied by the Federal Trade Commission, Facebook received the largest ever fine imposed on any company following the Cambridge Analytica privacy violations. The giant had to pay $5bn for its involvement in the scandal, and the expectation is that Facebook is now under increased scrutiny.

$5billion

Valuation of Facebook's fine following the Cambridge Analytica scandal

Despite being a prominent global brand, Facebook is arguably not meeting privacy expectations. While the likes of Apple [AAPL] and Google [GOOG] have taken strides to meet the demand for consumer privacy, Facebook has been dragged back into court. Championing consumer privacy has become its Achilles’ heel and could damage its future performance.

The company met with further controversy on 14 April when Washington state’s attorney general filed a lawsuit against the social media behemoth. This time the issue surrounded political adverts, with Facebook failing to make the necessary disclosures required under the state’s campaign finance laws. This isn’t the first time Washington state has found an issue. In 2018 the social media company paid $238,000 to settle a dispute over political advertising.

Investors should be wary of these ongoing disputes, as, by continuing to breach guidelines, Facebook will need to pay out big sums of cash in reparations – which will have an effect on its year-end performance.

Of course, the other challenging area investors continue to follow are of Facebook’s planned cryptocurrency Libra stablecoin, and whether this will either bolster the company’s assets or drain them dry.

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